First Overseas Capital’s Merchant Banker Registration Suspended for 2 Months
Moneylife Digital Team 06 October 2025
Market regulator Securities and Exchange Board of India (SEBI) has suspended the registration certificate of First Overseas Capital Ltd (FOCL) for two months, citing violations of the net worth requirements mandated for merchant bankers.
 
FOCL, which has been registered as a merchant banker (MB) since January 2015, was inspected between 1 April 2021 to 31 March 2022. SEBI’s inspection findings, communicated in September and November 2022, revealed non-compliance with several provisions of the SEBI Merchant Bankers Regulations, 1992. This led to an enquiry under SEBI (Intermediaries) Regulations, 2008, specifically focused on FOCL’s failure to maintain the minimum prescribed net worth of Rs5 crore during FY19–21.
 
Certificates submitted by FOCL auditors showed that its net worth had dropped well below the regulatory threshold: Rs3.39 crore in FY18-19, Rs1.91 crore in FY19-20, and Rs2.31 crore in FY20-21. Despite this, the company continued to underwrite issues worth nearly Rs90 crore between 2018 and 2021. FOCL attributed the shortfall to accumulated losses and the impact of the COVID-19 pandemic. However, SEBI observed that the shortfall pre-dated the pandemic and emphasised that no exemption existed under the regulations.
 
During the enquiry, FOCL argued that SEBI’s earlier interim order-cum-show-cause notice (SCN) dated 23 October 2024 had already covered the inspection period and any further action amounted to double jeopardy, invoking the principle of res judicata. SEBI rejected this claim, noting that the interim order related to a later inspection FY22–24 and distinct violations, whereas the present proceedings pertained exclusively to FY19–21.
 
The merchant banker also cited an 11 December 2024 order of the securities appellate tribunal (SAT), which stayed the SEBI debarment order subject to the infusion of Rs3 crore, arguing that this mitigated the case. SEBI clarified that the SAT order related to compliance in later financial years and had no bearing on the violations established for the earlier period.
 
The designated authority (DA), after considering FOCL submissions, recommended suspension of the company’s merchant banking licence for six months and a regulatory censure. SEBI, however, took a slightly lenient view by restricting the suspension period to two months. Nonetheless, it underscored that capital adequacy is a core requirement for merchant bankers, ensuring their financial strength to meet underwriting commitments and protect investor interests.
 
Rejecting FOCL’s contention that the breach was merely technical, SEBI stressed that failure to maintain net worth directly undermines investor protection and market confidence. “The violation is substantial and not technical,” the regulator observed, adding that leniency could not be extended in cases where capital adequacy norms are repeatedly flouted.
 
With this order, FOCL’s merchant banking operations will remain suspended for two months, serving as a strong reminder that regulatory capital norms are central to maintaining integrity and stability in the securities market.
 
Last year in October, SEBI barred FOCL from taking any new mandate as a lead manager for any public issue of debt securities until further orders for allegedly violating merchant bankers' rules. (Read: First Overseas Capital Barred from Acting as Lead Manager for New Issues)
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